Guardian of Bankruptcy Claims: Article 5 of the Enterprise Bankruptcy Law—Reconstructing the Jurisprudential Framework for Cross-Border Bankruptcy Adjudication

I. Opinion of the Supreme People’s Court on Piloting the Recognition and Assistance of Insolvency Proceedings in the Hong Kong Special Administrative Region In 2021, to address mutual recognition and assistance concerning insolvency proceedings across Mainland China and Hong Kong—two distinct legal jurisdictions—the Supreme People’s Court issued the above-mentioned pilot opinion. Article 4 stipulates that this opinion applies to Hong Kong insolvency proceedings where the Hong Kong SAR is the debtor’s center of main interests (COMI). The ‘center of main interests’ generally refers to the debtor’s place of registration; however, courts must also comprehensively consider factors such as the location of the debtor’s principal administrative office, primary place of business, and principal assets when determining COMI—thereby establishing COMI as a jurisdictional review standard in Hong Kong. Representative Case: In the Huaxin Energy bankruptcy case, regarding Huaxin Group’s assets located in Hong Kong, the Shanghai No. 3 Intermediate People’s Court issued a judicial assistance letter (“Request Letter”) to the Hong Kong High Court, while the administrator simultaneously filed an application before the Hong Kong High Court seeking recognition of the Shanghai No. 3 Intermediate People’s Court’s bankruptcy liquidation proceedings. In December 2019, the Hong Kong High Court signed a written order (“ORDER”) recognizing both the Shanghai No. 3 Intermediate People’s Court’s acceptance of the Shanghai Huaxin bankruptcy liquidation proceedings and the appointed administrator’s status, and confirming the joint administrators’ authority to act in Hong Kong. III. Evolution of Adjudicative Rules in Judicial Practice (A) Empirical Examination of Extraterritorial Effect of Domestic Bankruptcy Proceedings Jianshan Photovoltaic Bankruptcy Case, Hai Ning Intermediate People’s Court, Zhejiang Province: In December 2013, the Intermediate People’s Court of Hai Ning City, Zhejiang Province, ruled that Jianshan Photovoltaic enter restructuring proceedings. Upon discovering that Jianshan Photovoltaic held solar panel inventory in the United States valued at RMB 150 million, the administrator applied to a U.S. court in July 2014 for recognition of the mainland restructuring proceedings to prevent loss or dissipation of the debtor’s assets. After determining under Chapter 15 of the U.S. Bankruptcy Code[9] that the mainland proceedings constituted a ‘foreign main proceeding’ initiated in the debtor’s center of main interests, the U.S. court swiftly granted recognition. Before and after obtaining such recognition, the mainland administrator secured three forms of judicial assistance: provisional relief, automatic stay, and discretionary relief. (B) Review Standards for Recognizing Foreign Insolvency Proceedings Based on the case involving an application by a Japanese company for recognition and enforcement of a foreign civil ruling—the Chinese court’s recognition of and assistance to a Japanese civil rehabilitation proceeding—the following fundamental standards apply: 1. Whether the foreign insolvency proceeding is a collective debt settlement process initiated by the court in the debtor’s center of main interests; 2. Whether the principle of reciprocity is satisfied; 3. Whether any grounds exist for refusing recognition and assistance—namely, whether recognition would violate the fundamental principles of PRC law, impair national sovereignty, security, or public interest, or prejudice the lawful rights and interests of creditors within the territory of the People’s Republic of China. IV. Recommendations for Improving Cross-Border Insolvency Mechanisms (A) Establishing a Model Recognition Procedure Drawing upon the UNCITRAL Model Law on Cross-Border Insolvency, further strengthen inter-regional cooperation on cross-border insolvency matters. (B) Establishing Specialized Adjudication Mechanisms The Shenzhen Bankruptcy Tribunal has already set up a Cross-Border Insolvency Adjudication Center; continued exploration and wider promotion of specialized courts or tribunals dedicated to handling bankruptcy and cross-border bankruptcy cases is warranted. V. Representative Cases (A) The Huaxin Energy Series of Bankruptcy Cases

Discussions on Issues Concerning the Transition from Enforcement to Bankruptcy for ‘Zombie Enterprises’

II. Eliminating ‘Zombie Enterprises’ to Break Market Stagnation (A) Improving Exit Mechanisms for ‘Zombie Enterprises’ to Enhance Market Competitiveness Applying bankruptcy procedures to corporate entities does not necessarily entail liquidation. On the contrary, insolvent enterprises gain access to multiple debt-resolution pathways and possibilities—regardless of whether the legislative purpose of the bankruptcy system explicitly includes phasing out backward enterprises. Promoting the transition from enforcement to bankruptcy (“enforcement-to-bankruptcy”) faces challenges primarily in the ‘transition’ phase, yet its value lies precisely in achieving actual ‘bankruptcy’. Ultimately, resolution must rest upon bankruptcy adjudication; otherwise, cases cannot be concluded within statutory time limits—and some may even drag on indefinitely. Thus, if the enforcement-to-bankruptcy mechanism fails to resolve the difficulty of initiating bankruptcy proceedings, the broader objective of alleviating enforcement difficulties will remain unfulfilled. In practice, attention must therefore be paid to key procedural stages—not only tackling obstacles preventing referral (“failure to refer”) and case registration (“failure to accept”), but more crucially ensuring effective bankruptcy resolution (“successful bankruptcy”). Unlike ordinary bankruptcy proceedings initiated by parties’ applications, subsequent bankruptcy proceedings under the enforcement-to-bankruptcy framework can build upon achievements already attained during enforcement—particularly given the extensive asset investigation tools available at the enforcement stage, resulting in greater overall efficiency. The rationale underlying this view rests on four points: First, during enforcement, enforcement authorities have already conducted detailed investigations into the debtor’s assets and implemented corresponding enforcement measures—including exhaustive investigative efforts—effectively mapping the full scope of the debtor’s assets; second, the debtor’s operational status has been largely clarified; third, the status of the legal representative and employees has been substantially ascertained; fourth, financial records and creditor-debtor relationships have likewise been thoroughly examined. In short, enforcement authorities have essentially determined whether the judgment-debtor enterprise possesses executable assets. Moreover, all these steps and findings constitute mandatory procedures in bankruptcy proceedings. Thus, work completed during enforcement has already laid the groundwork for bankruptcy proceedings. Resolving enforcement difficulties hinges precisely on this linkage: in clearing backlogged enforcement cases, merely relying on enforcement measures to achieve zero inventory of pending enforcement cases is insufficient. Instead, flexible integration and seamless coordination between enforcement and bankruptcy procedures—building bridges between them—is essential to meet societal expectations. In the case cited at the outset of this article, the court, while enforcing a judgment against Aikesi’er Company as judgment-debtor, discovered that this sole debtor involved numerous creditors. After conducting asset investigations, it was found that Aikesi’er Company held no executable assets. Pursuant to Articles 154 and 257 of the Civil Procedure Law and relevant provisions of its judicial interpretation, the court lawfully ruled to terminate enforcement proceedings for certain cases on an interim basis. Had the case not been referred for bankruptcy review, those 18 enforcement cases involving Aikesi’er Company could only have been provisionally terminated. Yet, in judicial practice, it is widely understood that ‘termination on an interim basis’ does not signify final case closure. First, under the policy framework of ‘basically resolving enforcement difficulties’, the Supreme People’s Court employs information technology to conduct centralized inquiries into cases entered into the ‘interim termination database’, feeding back any newly identified asset leads to the relevant enforcement court. Second, enforcement courts remain obligated to investigate asset leads provided by applicants for enforcement concerning such provisionally terminated cases. Should new assets indeed be discovered later, enforcement proceedings must be promptly resumed. Following referral for bankruptcy, once the court declared Aikesi’er Company bankrupt, all 18 enforcement cases could be lawfully terminated—thus avoiding a host of ensuing complications.

Brazil Court Ruling Threatens Braskem Idesa Bankruptcy Exit

Oct 6, 2026

A Brazilian court injunction blocks $486 million in funding from Braskem to its joint venture Braskem Idesa, threatening the JV's bankruptcy exit. Braskem plans to appeal the ruling, risking stake dilution if alternative financing becomes necessary.

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Brazil Court Ruling Threatens Braskem Idesa Bankruptcy Exit

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